Does Virginia have a capital gains tax?
Virginia capital gains tax is part of the state income tax: gains from selling real estate are added to your other income and taxed at the same graduated rates as wages, from 2% up to 5.75%. Virginia has no separate capital gains rate and no break for gains on property held more than a year.
The brackets in Section 58.1-320 of the Code of Virginia have not changed since 1990, and the 5.75% rate applies to every dollar of taxable income above $17,000. On a $1 million gain from a building in Richmond or Fairfax, the Virginia tax is close to a flat 5.75% of the gain.
Virginia income tax brackets for 2026
Virginia uses four brackets, and the statute sets the same dollar ranges for every filing status. Because the top bracket begins at $17,000, the lower brackets save only a few hundred dollars, and they are usually used up by your other income before the gain is counted.
The first $17,000 of taxable income is taxed at a blended $720, about 4.2%. Every dollar above that is taxed at 5.75%.
| Virginia taxable income | Rate | Tax on the bracket |
|---|---|---|
| $0 to $3,000 | 2% | Up to $60 |
| $3,001 to $5,000 | 3% | Up to $60 |
| $5,001 to $17,000 | 5% | Up to $600 |
| Over $17,000 | 5.75% | 5.75% of the excess |
How Virginia tax stacks on federal tax
You owe Virginia tax and federal tax on the same gain, and only the federal side splits it into layers. For 2026, under IRS Revenue Procedure 2025-32, the 20% federal rate on long-term gains applies above $613,700 of taxable income for married couples filing jointly and $545,500 for single filers. The 0% rate covers income up to $98,900 joint and $49,450 single.
Federal law taxes the depreciation you took as unrecaptured Section 1250 gain at up to 25%, and the 3.8% net investment income tax applies once modified adjusted gross income passes $250,000 joint or $200,000 single. Virginia ignores those layers and taxes the whole gain at its regular rates.
| Part of the gain | Federal rate (2026) | Virginia rate |
|---|---|---|
| Appreciation above original cost | 0%, 15% or 20% | Up to 5.75% |
| Straight-line depreciation (unrecaptured 1250 gain) | Up to 25% | Up to 5.75% |
| Section 1245 recapture on personal property | Ordinary rates up to 37% | Up to 5.75% |
| Short-term gain (held one year or less) | Ordinary rates up to 37% | Up to 5.75% |
| Net investment income tax | 3.8% above the MAGI thresholds | None |
Virginia’s 2026 conformity law and bonus depreciation
Virginia follows the Internal Revenue Code as of a fixed date, and House Bill 29 (2026 Acts of Assembly, chapter 7), enacted February 20, 2026, set that date at December 31, 2025, according to Virginia Tax Bulletin 26-1. The same law decoupled Virginia from several 2025 federal changes, including immediate expensing of qualified production property and domestic research costs and the higher expensing limits for depreciable business assets.
Virginia also continues its long-standing decoupling from federal bonus depreciation. If you took bonus depreciation federally, for example after a cost segregation study, you added the difference back on your Virginia return and depreciate those assets more slowly for Virginia. Virginia Tax requires owners to keep separate Virginia depreciation records.
That separate schedule changes the gain at sale. Your Virginia adjusted basis is usually higher than your federal basis, because Virginia allowed less depreciation, so your Virginia gain can be smaller than your federal gain. Make sure your preparer uses the Virginia basis, not the federal one, when figuring the state tax. Ask for the Virginia depreciation schedule early, since buyers and closing dates do not wait for a missing file.
Short-term and long-term gains in Virginia
Virginia taxes short-term and long-term gains the same way. A building flipped in nine months and one held for twenty years both go into Virginia taxable income at the same rates, which in practice means 5.75% on almost all of a sizable gain.
The holding period still matters on your federal return, where a sale after one year or less is taxed at ordinary rates up to 37%. If you are close to the one-year mark, waiting can cut the federal bill a lot without changing the Virginia bill.
Do nonresidents pay Virginia tax when they sell property?
Yes. A nonresident who sells Virginia real estate owes Virginia tax on the gain and reports it on a nonresident return. Virginia does not collect it through withholding at closing. Instead, it requires registration.
Under Virginia Tax’s nonresident property owner rules, the real estate reporting person at closing, usually the settlement agent, must get a registration form from each nonresident seller. Individuals use Form R-5; partnerships, S corporations, estates and trusts use Form R-5P. The settlement agent files it by the 15th of the month after closing, and if the seller does not fill it out at closing, the agent completes it for them. Sales that are not subject to Virginia income tax are exempt, and a sale exempt from both federal and state tax uses the Form R-5E exemption certificate.
If you live in Maryland or North Carolina and sell a building in Arlington or Norfolk, expect to file a Virginia return for the year of sale and check whether your home state gives a credit for the Virginia tax.
Virginia residents selling property in other states
A Virginia resident is taxed on all income, wherever the property sits. If you live in Alexandria and sell a rental in North Carolina, the gain goes on your Virginia return, and North Carolina taxes it too as the state where the building is located.
Section 58.1-332 of the Code of Virginia gives residents a credit for income tax paid to another state, but read its limits closely. The credit covers gains from selling capital assets that are included in federal adjusted gross income, and the statute excludes gains from assets used in a trade or business. It is also capped at a share of your Virginia tax, based on the other state’s income divided by your Virginia taxable income. Whether a rental building counts as a business asset for this purpose is a question for your preparer, and the answer can change the result by tens of thousands of dollars on a large sale.
Worked example: selling a $2 million apartment building in Virginia
A married couple in Henrico County sells a 20-unit building in Richmond for $2,000,000 in 2026. Selling costs are $90,000, so the amount realized is $1,910,000. They paid $1,150,000 and took $340,000 of straight-line depreciation with no bonus depreciation, so their federal and Virginia basis are the same: $810,000. The gain is $1,100,000. Their other taxable income is $420,000.
Federal tax: the $340,000 of depreciation is unrecaptured Section 1250 gain at 25%, or $85,000. The other $760,000 sits above the $613,700 threshold once stacked on their income, so it is taxed at 20%, or $152,000. The 3.8% net investment income tax on the full gain adds $41,800. Federal tax on the sale is $278,800.
Virginia tax: their other income already fills the lower brackets, so the full $1,100,000 is taxed at 5.75%, or $63,250. Combined, the couple owes about $342,050, roughly 17.9% of the amount realized. Virginia’s share is about 18.5% of the total. You can run your own figures in the capital gains tax calculator.
| Item | Amount |
|---|---|
| Amount realized | $1,910,000 |
| Gain | $1,100,000 |
| Federal tax | $278,800 |
| Virginia tax (5.75%) | $63,250 |
| Total tax | $342,050 |
How a 1031 exchange changes Virginia tax
A 1031 exchange defers Virginia tax along with federal tax, because Virginia starts from federal adjusted gross income and conforms to Section 1031. In the example above, a full exchange into a replacement worth $2,000,000 or more would push the whole $342,050 into the future, including the $63,250 Virginia share.
Virginia has no clawback. If you trade a Virginia Beach building for one in North Carolina, Virginia does not track the deferred gain the way Oregon or California do. Any cash or debt relief you keep is boot, taxed by both the IRS and Virginia in the year of the exchange. Virginia also regulates exchange facilitators under its Exchange Facilitators Act. Our guide to the 1031 exchange in Virginia covers the state details, and the 1031 exchange rules page covers the federal deadlines.
Ways to lower the Virginia tax on a sale
With 5.75% applying to nearly all of a large gain, bracket planning does little in Virginia. What moves the number is deferral, timing and basis.
- Exchange instead of selling. A 1031 into another building or a Delaware statutory trust defers both federal and Virginia tax.
- Use your Virginia basis. If you took federal bonus depreciation, your Virginia gain may be smaller than your federal gain.
- Consider an installment sale. Spreading principal over several years spreads the gain, though any Section 1245 recapture is taxed in full in the year of sale.
- Plan around residency only for property outside Virginia. Gain on a Virginia building stays Virginia-source income even if you move away before the sale.
Selling a Virginia apartment building to Skyline
Skyline buys apartment buildings with five or more units in Virginia, from Northern Virginia and Richmond to Hampton Roads, Roanoke and Charlottesville. We buy directly, close on your timeline, and can work inside 1031 deadlines. A firm closing date lets your CPA pick the tax year and line up any exchange.
For the tax a buyer will carry after closing, see property tax rate in Virginia. For tenant rules that come with the building, see Virginia landlord-tenant law for apartment owners.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
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